Market Turning Points

Precision timing
for all time frames through a multi-dimensional approach to
forecasting
using technical analysis: Cycles - Breadth - P&F and Fibonacci price projections
supplemented by Elliott Wave analysis

"By the Law of Periodical Repetition, everything which has
happened once must happen again, and again, and again -- and not capriciously,
but at regular periods, and each thing in its own period, not another's,
and each obeying its own law... The same Nature which delights in periodical
repetition in the sky is the Nature which orders the affairs of the earth.
Let us not underrate the value of that hint." ~ Mark Twain

Current Position of the Market

SPX Long-term trend: The long-term trend is up but weakening. Potential
final phase of bull market.

SPX Intermediate trend: The uptrend from 1810 continues, but it has
entered a corrective phase which could extend into November.

Analysis of the short-term trend is done on a daily basis with the
help of hourly charts. It is an important adjunct to the analysis of daily
and weekly charts which discuss longer market trends.

Daily
market analysis of the short term trend is reserved for subscribers. If you
would like to sign up for a FREE 4-week trial period of daily comments, please
let me know at ajg@cybertrails.com.

Reluctant Selling

Market Overview

The market continues to work itself lower at a snail’s pace. If this continues
for the next three weeks, this will turn out to be a much more limited correction
than originally anticipated. The trick in trying to evaluate its extent is
to determine which part of the top distribution pattern will give us the correct
projection. Depending on which area we choose, it could be anywhere from a
little over a hundred, to a three-hundred-point decline (and counting). The
former is starting to look more and more likely, particularly considering the
disjointed nature of the overall market, with only the major averages seemingly
being coherent.

Unless! The smaller correction may only be the tip of the iceberg and that,
after it is over, the next rally fails to make a new high but simply adds to
what turns out to be a long-term distribution pattern. For now, I still believe
that an eventual move to 2240 is possible, based on the accumulation which
took place at the 1810 level. However, if the rally which follows the current
correction fails to make a new high, and a new phase of weakness begins, I
may have to change my opinion.

There are some, like Tony Caldaro, who believe that a new bull market has
been under way since February 2016. Tony does not make snap judgments, but
bases his opinion on historical precedents. However, for now all long-term
forecast are pure speculation. The market reveals itself phase by phase and,
with proper analysis, we do not have to be surprised by the next move. We are
currently in a correction which, when complete, should be followed by an uptrend,
the nature of which we will analyze when it takes place.

Analysis

Daily chart

The perception that we are making a rounding top was supported by last week’s
SPX action. We are now able to connect a declining top with three trend lines
which are trending at a steeper and steeper angle. After the first decline
from the top formation, we started a sideways move which is beginning to look
more and more like triangle. If this is the case perhaps, after a little more
weakness, we should get one more rally to the last declining trend line and,
on the next move lower, we should convincingly break through the dashed line
and, at a minimum, proceed to the vicinity of the blue parallel drawn across
the Brexit low.

As of now, there is no technical evidence altering the view that the cycle
is still bottoming with a presumed ETA late next month. We can also see that
the 2115-2120 level has been a strong support area which has held prices for
nearly two months. If the cycle continues to exert pressure for another three
weeks, it’s unlikely that this level will hold and, when it gives way, we should
get the rapid climactic move that is typical of this formation.

For now, at least, the oscillators are not disagreeing with my expected scenario.
They gave a sell signal when they made a bearish cross of their slower MA.

The hourly chart shows that price movement has progressed in down staircase
fashion. The last minor up-channel back-tested the trend line from 1810 three
times before the index started down. As suggested above, that decline may not
be quite finished -- with another drop slightly below last week’s low.

That would complete the “d” wave of the triangle discussed – and more visible
– on the daily chart. The next move would then go and challenge the top of
the down-channel, and possibly move slightly above before completing the triangle
formation. This would be followed by the decline into the cycle low.

The oscillators, especially the MACD, are still declining and are all below
their moving averages. This suggests that the near-term decline is not over,
especially since we closed below 2131 on Friday, a level which has held prices
for the past month.

Last week’s selling is not all that noticeable at the weekly level for the
indexes shown below. The one which was the most affected is IWM, which is one
of the prime leading indicators. If you look closely, you will also see that
the NYA was the worst performer of the main indexes. It is also the one which
comprises the most equities. The rest simply stopped going up but do not show
that much long-term distribution.

The overall picture is not one of a market which is under massive distribution
and which is ready to start a serious decline. So far, it’s either a consolidation
in an uptrend, or the beginning of a more extended period of distribution which
will continue after the cycle currently pressing on the market has bottomed.

UUP has reached the top of its up-channel and pulled back, which is normal.
The fact that prices reached the top of the channel, and even went a little
beyond, suggests that there is no price deceleration, but that a normal overbought
profit-taking process is underway. After some consolidation, the index is expected
to challenge the current resistance level once again and perhaps even to rise
out of the 18+-month corrective channel.

After a long and deep correction from its July 2011 high, GDX started what
could be a new significant uptrend which has now retraced 50%. The retracement
corresponds with an important support line, and both factors contributed to
a 3-wk bounce.

That bounce did not create a new uptrend, but appears to be only a consolidation.
The position of the indicators strongly suggests that the correction is not
over, and that a new low to the .618 level could materialize over the next
couple of weeks. Should that happen, the index’s ability to transform its strong
initial rally from the lows, into a major new uptrend will be judged on subsequent
performance.

Summary

SPX continues its rounding top formation and may be in the process of forming
a triangle consolidation which should be followed by a sharp drop into the
cycle low.

The formation of a triangle pattern is only speculation at this point, and
the pattern could easily evolve into something else, with the downward acceleration
coming sooner. In either case, the correction continues to be a work in progress
which is incomplete.

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The above comments and those made in the daily updates and the
Market Summary about the financial markets are based purely on what I consider
to be sound technical analysis principles. They represent my own opinion and
are not meant to be construed as trading or investment advice, but are offered
as an analytical point f view which might be of interest to those who follow
stock market cycles and technical analysis.

The above comments about the financial markets are based purely on what I
consider to be sound technical analysis principles uncompromised by fundamental
considerations. They represent my own opinion and are not meant to be construed
as trading or investment advice, but are offered as an analytical point of
view which might be of interest to those who follow stock market cycles and
technical analysis.